On 10/5, local time, the 45th meeting of the Joint Ministerial Supervision Committee of OPEC (JMMC) and the 33rd ministerial meeting of OPEC+were held in Vienna, Austria, and it was decided that from 2022 1 1 month, OPEC+will.

At the same time, OPEC+also announced that the frequency of ministerial supervisory committee meetings will be adjusted from once a month to once every two months, and the frequency of ministerial meetings will be adjusted to once every six months. At the same time, JMMC will be authorized to hold additional meetings or convene OPEC+ministerial meetings. 1On February 4th, OPEC+will hold its 34th ministerial meeting.

Before this meeting, OPEC+decided to increase production by100000 barrels per day in September, and then decided to reduce production by100000 barrels per day in October, so the monthly production target of100000 barrels per day is actually exactly the same as that in August. This year,1/kloc-.

The effect of OPEC+production reduction can be described as immediate. In the third quarter, Brent crude oil and WTI crude oil both fell by more than 20%, and the oil price has returned to the level before the outbreak of the Russian-Ukrainian conflict at the end of February. WTI crude oil even fell below $80. Driven by OPEC+production reduction expectations, international oil prices have risen by about 10% this month. At present, the price of Brent crude oil has risen above $93/barrel, and WTI crude oil has risen above $87/barrel.

The game between oil-producing countries and consuming countries is tense.

While the international crude oil price weakened in the previous months, the domestic gasoline retail price in the United States also fell sharply. American drivers spent more than $5 a gallon at gas stations this summer, but now they spend less than $4. If gasoline prices soar again, it will do great harm to Biden's Democratic Party, which may lead to the change of ownership and the party in both houses of Congress.

It should be noted that OPEC+'s decision to cut production vigorously is only about one month away from the mid-term elections in the United States. For Biden, who just visited the Middle East not long ago, OPEC+'s move may lead to another rise in gasoline prices in the United States, and the mid-term elections of the Democratic Party will be negative again.

Therefore, before OPEC+made the final production decision, Biden launched a comprehensive pressure campaign, trying to persuade OPEC+not to drastically cut oil production at the last minute. The White House described the prospect of production cuts as a "complete disaster" and warned that OPEC+production cuts might be regarded as a "hostile act".

But in the end, OPEC+ignored the US warning and chose to cut production to defend high oil prices and its own interests. At the first offline meeting after the COVID-19 outbreak in 2020, multinational energy ministers gathered in the Austrian capital, Vienna, and formally offered the biggest decision to reduce production since the COVID-19 outbreak.

On the other hand, the United States has also taken some countermeasures. The White House said that Biden was disappointed with the "short-sighted behavior" of OPEC+oil production reduction decision. The U.S. Department of Energy will release 1 1 month/0 million barrels of strategic oil reserves. In order to protect American consumers and promote energy security, Biden may continue to "appropriately" dump stocks.

In addition, Biden's administration will hold consultations with Congress on how to reduce OPEC+'s control over energy prices, and NOPEC may reappear on the agenda of the United States. The bill will enable the U.S. government to sue OPEC members for manipulating the energy market and may seek billions of dollars in compensation, and the bill has won wide support from both parties in the U.S. Congress.

What is the effect of OPEC+vigorously reducing production?

It should be noted that, although OPEC+1 1 month and1February showed a reduction of 2 million barrels per day, the actual reduction was far less than this.

Because of the lack of production increase before, many countries have produced far less oil than their quotas, so they don't have to reduce their production any more. AmirHosseinZamaninia, Iran's Deputy Minister of Oil, made it clear that the baseline for reducing production by 2 million barrels per day is the same as the previous OPEC+agreement.

On the whole, the actual production reduction of OPEC+may be slightly lower than1100,000 barrels per day. AmenaBakr, chief OPEC reporter of EnergyIntelligence, an energy research company, said that the total output of OPEC+will be reduced by 2 million barrels per day from 1 1 month, but the actual production reduction will be slightly lower than1million barrels per day.

Goldman Sachs estimates that the effective net production reduction of OPEC+will be only 400,000 to 600,000 barrels per day in 1 1 month and1February this year, mainly from OPEC countries in the Persian Gulf region such as Saudi Arabia, Iraq, Kuwait and United Arab Emirates.

Nevertheless, the 180 degree turn from increasing production to decreasing production is still favorable for oil prices. After the announcement of OPEC+decreasing production, Goldman Sachs raised its oil price forecast, and raised its Brent crude oil price forecast in the fourth quarter of this year by 10 to10 $/barrel. Goldman Sachs believes that OPEC's decision to cut production from 1 1 to1February is "very favorable" to the oil market.

Although concerns about the economic recession in Europe and the United States are heating up, the demand side of the oil market is actually performing well. In its monthly report in September, OPEC kept its forecast of strong growth in global oil demand unchanged. It is predicted that global oil demand will increase by 3 10/00000 barrels per day in 2022 and 2.7 million barrels per day in 2023. OPEC said that despite unfavorable factors such as soaring inflation, the demand situation in major economies was better than expected.

The International Energy Agency (IEA) also predicts that the oil demand will continue to increase this year and next. IEA predicts that the global oil consumption will increase by 2 million barrels per day to 99.7 million barrels per day this year, and the demand will continue to increase by 2 10/00000 barrels per day to1.01800 million barrels per day in 2023.

After OPEC+made a great effort to cut production, the international oil price may break through the 100 mark again in the fourth quarter. JPMorgan Chase said that the rebound in demand, energy companies' continued insufficient investment in capital expenditure, Iranian oil still unable to enter the market, and OPEC's production reduction may make oil prices soar above 100 USD/barrel again in the fourth quarter of this year.

Zhu Runmin, a senior economist in the petroleum industry, told the reporter of 2 1 Century Business Herald that the basic characteristics of international crude oil prices are "short-term violent shocks, periodicity in the medium term and long-term upward trend". In the short term, oil prices have fluctuated violently, and under the influence of the global macroeconomic situation, they have not yet entered the mid-term cyclical high. In the long run, oil prices still have room to rise in the era of supply shortage.

For the future, unpredictable geopolitical risks are also expected to support oil prices, and Russian production may continue to decline. The EU will suspend the purchase of most crude oil from Russia from this year1February 5, and the EU's ban on Russian petroleum products will take effect from February 5 next year. According to the International Energy Agency, with the entry into force of the EU import ban, the rate of decline in Russian oil production will accelerate. By the beginning of 2023, Russia's output will be close to 2 million barrels per day, down by about 20%.